The Yuan rose to a 17 year high against the dollar after the Federal Reserve Board announced it will maintain low interest rates until mid 2013.

As per the People’s Bank of China the rate of Yuan against the dollar was 6.3948, 0.36% higher than the previous day closing, this is the biggest rise in last nine months.

After the Fed Announcement of keeping interest rates low economists have expressed concern that low interest rates in the United States would make it more difficult to control inflation in China, which is currently the main priority of the largest exporting nation. China’s inflation was recorded at 6.5% in July highest in 37 months.

It is also widely expected that US will launch a third round of Quantitative Easing policy to boost its economy. It will being more hot money into the emerging countries like China, India, Brazil, which will make more difficult for the countries to control the inflation.

The IMF said last month that a stronger Yuan would help the global economy stabilize, as well as aid the Chinese government’s efforts to tame inflation and rebalance the nation’s growth towards domestic demand away from the exports. China’s Trade surplus for the month of July widened sharply to US $31.5 billion, its highest level since Jan 2009 as exports growth accelerated. A wider surplus also adds to the cash levels in the economy, potentially fuelling inflationary pressures. 

The Yuan is allowed trade up to 0.5 percent on the either side of the daily reference rate set by the Central Bank.